Southwest at Dulles May Hurt Its BWI Hub

When Southwest Airlines launches service at Washington Dulles International Airport on Thursday, one of its largest competitors is likely to be Southwest Airlines.

Southwest is entering a market that will draw from its hub just 60 miles away at Baltimore-Washington International Thurgood Marshall Airport. Taking in Southwest's presence at Philadelphia International Airport, the move to Dulles will make this region Southwest's second-largest saturation point behind Southern California, where it serves four airports in the Los Angeles area.

And it's the first time the nation's top discount carrier has moved into an airport so close to one of its top hubs.

Southwest typically doesn't use airports in close proximity because its discount fares often draw passengers from 90 miles away or more. Southwest also rarely sets its sights on such a big, busy airport as Dulles because its business model relies heavily on frequent flights and staying on schedule.

Southwest acknowledges that the move is atypical and that some business will shift from BWI. About 10 percent of BWI passengers drive in from Virginia, airport officials say, and much of the cannibalization could come from there.

"I do not enjoy the drive to and from BWI, but do it to save my employer on expenses," David Fisher, a health care consultant from Purcellville, Va., said in an e-mail. "Once Southwest enters [Dulles], I do not intend on driving to BWI ever again."

But Southwest executives insist that they will add new passengers to offset any cannibalization and that in any case, they cannot hurt themselves anywhere near the degree that Dulles-based Independence Air did while it was in business.

They say Southwest has increased its presence at nearly every airport it has entered, even after the airline has moved into a nearby airport.

"We're not backing off Baltimore because we're going to Dulles," said Richard Sweet, Southwest's senior director of marketing and sales.

"We recently announced service from BWI to Detroit. It's been the same in the Los Angeles basin and the others. We'll fly the same routes, and customers have a choice," he said. "You could fly into BWI, make three or four client calls and end up at Dulles."

Airport officials and aviation experts say there are reasons to agree with Southwest's strategy, one being that the Northern Virginia suburbs around Dulles are among the fastest-growing and wealthiest in the nation.

"I don't believe anyone can make a wrong decision going into Dulles," said Darryl Jenkins, an aviation consultant who lives in Northern Virginia.

"Wherever Southwest goes, it has an impact. I understand if the BWI guys are a little concerned, but [Southwest is] going where the population is. That's necessary for their growth and probably means they won't take too much Baltimore business."

Southwest has acknowledged that its BWI hub lost a significant amount of business to Independence Air, which operated hundreds of flights a day at deep discounts.

Convinced that Independence couldn't stay in the air for long, Southwest chose not to lower its BWI fares to match Independence's. The gamble paid off when Independence closed in January - opening space at Dulles for Southwest, as well as JetBlue Airways and United Airlines.

Southwest is taking only two gates at Dulles and plans only a dozen daily flights to start, at fares somewhat higher than Independence offered and the same as Southwest charges at BWI.

Those two factors, plus the growing pool of passengers in Northern Virginia, should mean that Southwest could thrive in both airports, said Mike Boyd, president of the Boyd Group, aviation consultants and forecasters.

"Independence didn't create a void, it created a bubble," he said. "It was selling seats for under cost and when it went away, many of those passengers went away. Southwest will stimulate more traffic at Dulles, yes, but not like Independence."

Dulles is more likely to draw from Washington west into Virginia, as far away as Charlottesville and Richmond, Jenkins said. There isn't another Southwest airport in Virginia for about 200 miles, in Norfolk.

Other carriers at Dulles will have some insulation against Southwest because they have customers entrenched in their frequent flier programs and offer amenities such as business and first-class cabins and in-flight entertainment. They also offer international service, and Southwest does not.

At BWI, Southwest controls about half the market with about 172 daily flights, many times the 12 planned at Dulles, and BWI officials say they still expect passengers to come from the Washington area. According to airport surveys, about half of its passengers drive from the Washington area.

BWI officials point out that the airport has continued to grow as Southwest has expanded in Philadelphia, even though about 15 percent of BWI passengers come from Pennsylvania.

In July, Southwest's monthly total exceeded 1 million passengers at BWI for the first time, up 6 percent from July 2005, said Jonathan Dean, a BWI spokesman. The airline again exceeded 1 million passengers in August, up 8 percent from August 2005.

In addition to the Washington area, Southwest saturates the Boston area with flights from Manchester, N.H., and Providence, R.I. That's also the case in the Los Angeles area, where Southwest flies from Los Angeles, Burbank, Ontario and Orange County. In the San Francisco area, it serves Oakland and San Jose. (The airline pulled out of San Francisco's airport in 2001 after 19 years, blaming flight delays.)

Southwest's Sweet said the airline has managed to add service at all of the other airports over time because its fares attract more people to travel - something the U.S. Department of Transportation dubbed the "Southwest effect." Also helping have been the record number of people flying and an Internet-fueled shift to low-cost carriers.

For their part, Dulles officials say the airport felt a void when Independence left. The number of domestic passengers at Dulles dropped to 1.02 million in July, from 1.54 million in July 2005.

"We knew from the beginning that Independence was not going to sustain the numbers," said Tara Hamilton, an airport spokeswoman. "They offered 600 flights, and that's highly unusual to introduce service with that many flights a day. What Independence did prove is that there is a tremendous market for low fares out of Dulles. And people and businesses continue to move in."

Southwest's success at Dulles - and BWI - will be up to passengers. They began booking Dulles flights online a few weeks ago and at the airport's recently overhauled ticket counter a few days ago. Some frequent fliers said price, convenience and perks would be factors driving their decisions.

William Beck, who lives about a half-hour from Dulles, said he can drive to BWI in about an hour to fly Southwest. That's something he did before Independence moved into Dulles and forced competitors to lower prices. It's something he expects to do again now that Independence is gone. He has a BWI flight scheduled in November.

"If [United Airlines) matches Southwest's prices, I will fly UA," he said. "If UA does not match, I will fly Southwest from Dulles. For destinations that require me to go to BWI, I will assess the trade-off of driving versus the cost savings I would receive from using Southwest as opposed to UA."